Outcome-based
investing
An investment approach for tomorrow’s
financial advisory practice
An investment approach to support
your world-class advisory practice
Focusing on the right conversation – your client’s financial wellness
The Momentum Financial Wellness Framework has been purpose built to provide you with a comprehensive
snapshot of your client’s financial wellness at any stage of their lives. More importantly, because the primary and
secondary needs are intertwined, the framework provides you with a holistic view of each of your clients’ state of
financial wellness. The framework also highlights gaps that could potentially prevent your client from enjoying optimal
financial wellness, now and in the future.
If I lose
my
income
If I get a
major illness
ME
T
C
SUPP
OR
T
MY MONEY
Provide for
future &
emergency
Y
DM
BUIL
Provide
for my
retirement
Create my
wealth
Financial plan
Budgeting
Debt management
Tax
FU
TU
RE
Family &
business
continuity
Having an
executable
will
If I die
prematurely
ILY
AM
YF
M
PRO
TE
If I become
disabled
If I have
family
medical
expenses
M
YS
TUF
F
If I have
medical
expenses
CT
E
T
PRO
My
buildings
To educate
my children
My car
My
personal
belongings
My home
content
In keeping with the financial wellness framework, Momentum has developed a unique investment philosophy that
prioritises the prospect of your client achieving their own unique investment goal. We call this revolutionary investment
approach Momentum Outcome-based Investing.
Page 2 of 16
| investments | outcome-based investing | 2017
An investment approach that focuses
on your client’s unique needs
For many years, investment management has been shrouded in complexity
Mathematical formulas, industry jargon and technical information has tended to dominate the investment management
industry. Performance has traditionally been measured relative to generic market indices or a peer group.
Understanding risk measures has required advanced finance degrees. And unfortunately, the inherent structural
imbalance of information and lack of transparency has contributed to many investors making poor investment
decisions, increased uncertainty, and ultimately has reduced investor trust.
This unfortunate evolution has been reinforced by the constant flow of short-term, peer or market benchmark
performance information. In other words, the regular updates about which fund or sector is the latest flavour of the
month or moment, who has outperformed their peer group and soundbites from the latest award-winning fund manager.
A new way to define success
All of the headlines about who is ahead are inevitably short-lived and literally change from week-to-week, if not dayto-day. And it unfortunately fuels your client’s emotions of fear and greed.
When your clients read about the latest short-term performance awards and figures, what do they feel? Euphoria
if they recognise a top performing name on their investment statement. Or perhaps fear about whether they may
be missing out. This often inspires questions about whether their money is in the best fund. Or worse, should they
change their investments. At Momentum Investments we believe that things are not always that simple.
We understand the behavioural influences your clients face. That is why we have made an important and profound
change to the way that we think about investing. We are building on our deep expertise in investing, where we have
many years of experience and proven results. But, most critically, we acknowledge the need to be more client and
investor-centric in our approach if we are to help your clients achieve their goals. This means:
• embracing the science of behavioural finance,
• building our process around your clients’ goal(s) and customising our investment capabilities to meet your
clients’ needs,
• ensuring that we assist you to ensure that your clients avoid common investor mistakes.
| investments | outcome-based investing | 2017
Page 3 of 16
What is
outcome-based investing?
It is a revolutionary approach to investing that prioritises your clients’ needs ahead of a
peer group or generic market benchmark
Financial market uncertainty and the investor risk aversion that accompanies this is the new norm. This is driving
a need for investors and financial advisers to find a more intentional framework for making investment decisions,
ultimately ensuring a greater probability of achieving a clearly defined set of goals. Along with this, there is an
increasing awareness that traditional risk and performance metrics are not necessarily aligned with your clients’
needs. It also highlights gaps that might prevent your clients’ from enjoying optimal financial wellness, now and in
the future.
It all starts with the needs of your client in mind and then makes allowance for their
behavioural preferences
We have all heard that the majority of active investment managers underperform their benchmarks. However,
research has further shown that many investors don’t achieve the same performance as the funds in which they are
invested. It is estimated that investors, in pursuit of improved returns, compounded this underperformance through
attempting to time their entry and exit into these funds. This sometimes value destroying practice, represents an
irrational ‘behaviour gap’. Investors also risk trying to time the market and face the threat of not being invested
during critical days of favourable market performance.
The objective is simple, to keep your clients invested
Missing top performing days by trying to time the market can result in your clients failing to achieve their
investment goals.
FTSE/JSE All Share Index, 1996 - 2016
18%
sometimes the best
thing to do is nothing
16%
Annualised return
14%
12%
10%
8%
6%
4%
2%
0%
Stayed
invested
Missed
5 days
Missed
10 days
Missed
15 days
Missed
20 days
Missed
25 days
Source: I-Net Bridge
Momentum Outcome-based Solutions are built around helping your clients
remain invested for long enough to reach their goals.
Page 4 of 16
| investments | outcome-based investing | 2017
Why don’t your clients get the best outcomes from their hard-earned wealth?
Essentially two key factors contribute to your clients’ disappointment with their investment returns, namely:
1. The traditional investment approach (which is focused on peer and benchmark relative outperformance) and
thus fails to incorporate your clients’ desired investment outcome(s);
2. Investor behaviour (the influence of psychology on how your clients make decisions and how common
behavioural biases have been shown to sabotage their success). Especially in a world where not all the relevant
information is accessible for effective decision making.
We aim to help investors make better decisions, whilst improving their probability of
investment success
Outcome-based investing seeks to proactively incorporate behavioural finance (the science of understanding
behavioural influences) into a framework that is measured by how successfully and predictably your clients are able
to achieve their unique goal(s).
An unwavering focus on your clients’ needs change how investment managers should
think about their investment approach
The Momentum Outcome-based Investment approach integrates our deep history of traditional investment
management excellence with our commitment to helping your clients make better decisions by utilising innovative
portfolio construction and leveraging off our unrivaled understanding of behavioural finance principles. It is a unique
way of investing that gives your clients access to the benefits of world-class asset-liability matching principles,
historically only available to large institutional investors. This asset-liability matching process ensures that
investments are chosen to be more in line with your clients’ specific goal(s), investment period and ultimately your
clients’ attitude towards risk for that specific goal and/or investment need.
Outcome-based investing:
• aligns your success with the financial wellness of your clients,
• rewards you for spending more time with your clients to understand their goals and then
helps you match these goal(s) to an appropriate investment strategy capable of meeting
their unique needs,
• provides your clients with peace of mind because it ensures that their investment journey
offers as few surprises as possible, and delivers on the desired outcome with more
certainty and predictability.
OK Google
What is Momentum Outcome-based Investing?
Use Google Voice Search on your mobile or desktop.
Or visit www.momentuminv.co.za/OBI to find the answer.
| investments | outcome-based investing | 2017
Page 5 of 16
How an outcome-based investment
approach can improve your
advisory practice
Momentum Outcome-based Investing is an innovative approach to investing that will resonate with you and your
advisory practice if you:
1.
Want to spend more time with your clients focusing on the things that matter
• Build deeper relationships and focus on building a business that helps your clients understand and meet their
essential needs, lifestyle wants and legacy aspirations rather than having to dedicate your time to research,
fund selection and portfolio construction.
• Help your clients to avoid the trap of common behavioural biases such as chopping and changing their
investments in response to the latest news or perhaps worse, chasing past performance.
• Enable your clients to benefit from the peace of mind of a smooth investment journey, knowing that they are
able to tolerate market volatility without compromising their ability to achieve their own unique goal(s).
• Measure your advisory and business success by the number of clients that you help achieve their goals.
Let us assist you in focusing your energies on what matters - your clients
Where advisers spend the majority of their time
Plan
preparation
Admin and
implementation
Product
advice
Data
gathering and
analysis
Plan
presentation
Ongoing
reviews
Performance
feedback
What clients value most
Relationship
management
Adviser time spent
Page 6 of 16
Client’s value
| investments | outcome-based investing | 2017
2.
Want to build your advisory business for a post-Retail Distribution Review (RDR) world
• You are clear on your role being that of a professional adviser and coach rather than an analyst or fund manager.
• You wish to delegate the research, selection and combination of investment mandates to investment
professionals. You are tired of attending investment manager ‘beauty parades’ for the purpose of picking the
next best fund or investment manager (without any long-term guarantee of success).
• You don’t wish to spend your time unraveling complex technical investment jargon to motivate or defend a
fund or investment manager choice to clients. You would rather help your clients manage their expectations
and spend time coaching them on how to make better long-term decisions that positively influence their
needs and goals.
• You are structuring your business for a post-RDR and Treating Customers Fairly (TCF) world – where
transparency, client-centricity and the ability to show the value of your advice is central to you and your
clients’ mutual success.
3.
Are you excited about improving your own investment advisory processes
• You believe that traditional investment reporting encourages the wrong client behaviour because it focuses on
price changes and risk metrics that aren’t necessarily aligned with their long-term success (in terms of your
clients’ specific goals and the desired journey to achieve them).
• You know that it isn’t a trivial decision to match clients’ needs to the most suitable investment solution – never
mind choosing and combining funds to implement the optimal investment approach.
• You believe that clients have different goals for different ‘pots’ of money and that their appetite for risk does
vary, depending on the goal.
| investments | outcome-based investing | 2017
Page 7 of 16
How is outcome-based investing
different to traditional investing?
Outcome-based investing puts the client-adviser relationship and financial planning at
the centre of the investment process
The idea behind outcome-based investing is that your clients should set specific, personal goals that they want to
achieve and should then structure their investment plans around those goals.
More certain outcomes relative to client goals
With outcome-based investing, instead of worrying about aiming for arbitrary investment benchmarks, your clients
can set unique and personal goals that make sense to them. The power of an outcome-based approach lies in its
ability to highlight how realistic a goal is relative to your clients’ risk preference and investment horizon, for the
investment to achieve a specific goal utilising and within the investment opportunities available. It also helps you
emphasise the importance of your clients separating their needs from their wants.
It embraces a more client-centric attitude to risk to encourage financial wellness
Most investors are willing to assume a higher level of risk for additional potential returns with money set aside for a
holiday home (a ‘want’) compared with money they have set aside for university education for a child (a ‘need’). If the
additional risk taken with the money set aside for the holiday house results in losses, your client could always adapt
their ambitions. However, their thinking will be fundamentally different when it comes to their child’s university
education. With Momentum Outcome-based Investing, traditional risk measures are therefore used alongside more
investor and goal-based risk measures that incorporate factors such as:
• Willingness to take risk
• The ability to take risk
• The need to take risk to achieve a predefined outcome
This creates a new approach to portfolio construction and management
There is an evolution in thinking about investment management. Momentum Outcome-based Investing challenges
conventional thinking so that you as the financial adviser and your clients are better able to pursue their financial
goal(s), whilst simultaneously managing risk. At the end of the day, Momentum Outcome-based Investing aims to
take the stress out of trying to time the market.
Page 8 of 16
| investments | outcome-based investing | 2017
How the Momentum product range
fits into outcome-based investing
•
Outcomes-based investing is an overarching philosophy and belief system
We are applying this to all our investment capabilities. It is a way of thinking that puts investor goals and
financial advisers at the center of our business.
•
It is based on our brand promise of financial wellness
We develop, manage and report on our investment capabilities in a way that helps investors remain invested
for long enough to achieve their goals, we are helping your clients to achieve financial wellness and thus
assisting your clients to have enough money for life’s journey.
•
It is about the true alignment of your clients’ needs with our specialist
investment expertise
At Momentum, we believe that true financial wellness is achieved when an
investor’s portfolio enables them to reach their goals. Benchmarks such
as stock and bond indices and peer comparisons can be useful tools for
evaluating portfolio performance, but they are limited and can unfortunately
encourage the very behavioural mistakes that we want to help investors avoid.
By focusing on what matters to your clients on a personal level — goals like
providing for a child’s education, a new home or income in retirement — helps
you provide them with an investment solution that’s customised to meet their
unique set of needs and their goals.
| investments | outcome-based investing | 2017
Page 9 of 16
How it works
an overview of our
outcome-based investment approach
Investor
Adviser
Benefits:
Benefits:
• Allows your clients to focus on and
articulate their goals.
• Aligned with the six steps of
financial planning (FPI) – with an
emphasis on knowing your client and
understanding their needs.
• Provides a personalised approach.
• Provides your clients with:
• peace of mind
• certainty
• predictability
• transparency
• Helps your clients to avoid making
common, but costly mistakes.
Page 10 of 16
• Enables you to meet RDR and TCF
requirements.
• Is the ultimate client-centric
approach to investing, because
success is measured by the
successful achievement of your
clients’ goals.
| investments | outcome-based investing | 2017
How we build
Momentum Outcome-based Solutions
Portfolio construction methodologies (much like markets) have evolved, people think differently, new ideas come to
the fore, asset return profiles change, perceptions and understanding of different risk metrics differ and all of this
leads to adaptive methodologies and techniques to account for the ever changing investment landscape.
Yet despite the ever-evolving investment challenges, one thing has remained remarkably consistent; all investments
need to ultimately cater for and deliver on an investor’s needs.
At Momentum we have developed a market-leading investment process to deliver on investor’s expectations.
1. We analyse markets and strategies to comprehend how best to create a well-diversified solution with the
optimal asset allocation.
2. We identify the most beneficial investment strategies to employ (including factors such as investment style,
regional exposures, currency, economic environment, etc.)
3. Mandate design and selection (whether active or passive) is the final step in our comprehensive outcome-based
investment process.
Innovative solution
Asset allocation
Investment strategy
Mandate selection
Each step in the investment process has been designed to ensure the highest
probability of achieving an investor’s goal.
How we ensure that we deliver on investment outcomes
70%
15%
8% 7%
Asset allocation | Investment strategy | Mandate selection | Other
| investments | outcome-based investing | 2017
Page 11 of 16
What this means
for you and your clients
Investor focus
and responsibility
Adviser focus
and responsibility
It is important that your
clients indicate a clear
purpose for their money,
which for most people
may include:
You as the financial
adviser have an
important role to play
in terms of helping your
clients improve financial
wellness, namely:
1. Meeting their
own essential
spending needs?
2. Providing for their
family needs,
including education
funding and estate
planning?
3. Do they have
community-related
aspirations, such as
charitable giving or
do they wish to leave
a legacy?
1. Assist your clients
by helping them
understand their
needs;
2. Help your clients
articulate their
needs into desired
investment
outcomes;
3. Facilitate regular
reviews of their
needs.
It’s all about having the right conversations.
Momentum Investments focus
and responsibility
Providing robust investment
solutions to meet your clients’
specific defined need(s).
Making sure that the solution
delivers on the defined outcome
(both in terms of an end goal and
how the returns are achieved).
Providing you with the educational
material, tools and communication
available to both you and your clients
to inform you both and equip you to
make appropriate choices.
Assist your clients to avoid common
behavioural biases and mistakes
that have been shown to undermine
investor results.
Providing your clients with reporting,
performance and risk metrics that
encourage disciplined investor
behaviour to help them achieve their
goals, rather than the traditional
focus on price changes and
performance relative to peers or a
generic market index.
Building on the purpose, you and your clients can work
together to clearly define the goals they would like to
achieve. When defining goals, three specific components are
particularly relevant and will help them to determine how to
best pursue each goal, namely:
1. Target value – the rand amount your clients need to
achieve the specific goal(s).
2. Time horizon – when your clients will need the money for
their goal(s)
3. Risk tolerance – your clients’ willingness and ability to take
risk to pursue the particular goal.
Page 12 of 16
| investments | outcome-based investing | 2017
An overview of our
outcome-based investment solutions
Introducing South Africa’s first truly outcome-based solution range
We recognise how difficult it is for you to choose investments that are capable of meeting your clients’ needs.
We also understand that your clients’ needs and preferences are unique and that they are investing for something
far more important than simply outperforming a generic market benchmark. In response, we have developed a
world-class range of Momentum Outcome-based Solutions. These purpose built solutions comprise of a leading
range of outcome-based collective investment schemes, guaranteed investments, personal share portfolios and
structured products. Each of these solutions has been skillfully crafted to maximise the probability of achieving your
clients’ goal(s).
Investment
need
Asset class
exposure
Capital protection
and liquidity
Capital
protection
Cash and cash
equivalent solutions
Multi-asset fixed
income solutions
Money
market
Collective
investment
scheme
range
Real growth
with capital
protection
Stable
income
Income
Real growth
Absolute
return solutions
Multi-asset
growth solutions
Absolute
return range
Enhanced
growth fund
range
Target
growth fund
range
Enhanced
cash
Single-asset
growth solutions
Enhanced equity
Core
equity
Listed property
Other
solutions
Deferred
maturity
Guaranteed
endowments
Life
annuities
Structured
product range
Direct
property
Momentum SP
Reid Securities
Return
objective
Investment
horizon
STeFI + 0.5% to + 1.0%
Short term
STeFI + 2.0%
CPI + 2.0%
to + 5.0%
Medium term
CPI + 3.0%
to + 7.0%
Market relative
Long term
Did you know?
For your convenience, this document has been embedded with an innovative QR codeTM. Please use any
mobile device to scan this QR codeTM to acquire further information on Momentum’s comprehensive
Outcome-based Solution range.
| investments | outcome-based investing | 2017
Page 13 of 16
We have also developed a leading range of local collective investment schemes (CIS) that
subscribe to our outcome-based investment philosophy.
Momentum Outcome-based Solution local portfolio range
Investment need
Capital
protection and
liquidity
Income
Real growth
with capital
protection
Asset class exposure
Cash and cash
plus solutions
Multi-asset
fixed income
solutions
Absolute
return
solutions
Portfolio names
Momentum
Money Market
Fund
Momentum
Diversified
Income Fund
Momentum
Defensive
Growth Fund
STeFI + 1.0%
to + 2.0%
CPI + 3.0%
net of fees
Momentum
Enhanced
Yield Fund
Investment objective
Risk continuum
Investment horizon
STeFI + 0.5%
Cautious
Short term
Did you know?
For your convenience, this document has been embedded with an innovative QR codeTM. Please use any
mobile device to scan this QR codeTM to acquire further information on Momentum’s comprehensive
Outcome-based Solution portfolio range.
Page 14 of 16
| investments | outcome-based investing | 2017
Long term capital growth
Single-asset
growth
solutions
Multi-asset growth solutions
Momentum
Enhanced
Cautious Growth
Fund of Funds
Momentum
Enhanced Stable
Growth Fund
of Funds
Momentum
Enhanced
Diversified Growth
Fund of Funds
Momentum
Enhanced
Growth Fund
of Funds
Momentum
Enhanced
Growth Plus
Fund of Funds
Momentum
Real Growth
Equity Fund
Momentum
Target Cautious
Growth Fund
of Funds
Momentum
Target Stable
Growth Fund
of Funds
Momentum
Target Diversified
Growth Fund
of Funds
Momentum
Target Growth
Fund of Funds
Momentum
Target Growth
Plus Fund of
Funds
Momentum
Real Growth
Core Equity
Fund
Momentum
Real Growth
Property
Fund
CPI + 2.0%
net of fees
CPI + 3.0%
net of fees
CPI + 4.0%
net of fees
Moderate
Medium term
| investments | outcome-based investing | 2017
CPI + 5.0%
net of fees
CPI + 6.0%
net of fees
Market
relative
Aggressive
Long term
Page 15 of 16
Why Momentum?
As South Africa’s leading outcome-based investment manager, Momentum helps thousands of people and
some of the country’s largest institutions achieve their investment goals.
Momentum offers the following outcome-based investments:
• A comprehensive range of innovative solutions, including the Momentum Enhanced and Target Fund of
Fund ranges.
• Enhanced certainty through a sophisticated range of guaranteed solutions including the Momentum
Growth Enhancer.
• Access to a wide range of share portfolios through Momentum Securities.
• The ability to partner with financial advisory practices to build bespoke and scalable outcome-based
solutions through Momentum Investment Consulting.
Want to know more?
Contact your Momentum Marketing Adviser
Call us on 0860 546 533
www.momentum.co.za
Disclosure
Collective investment schemes in securities are generally medium- to long-term investments. The value of participatory interests or the investment may go down as well as up.
Past performance is not necessarily a guide to future performance. The manager does not provide any guarantee, either with respect to the capital or the return of a portfolio. For
certain portfolios the manager has the right to close these portfolios to new investors to manage them more efficiently, in accordance with their mandates. Collective investment
schemes are traded at ruling prices and can engage in borrowing and scrip lending. The collective investment scheme may borrow up to 10% of the market value of the portfolio
to bridge insufficient liquidity. Different classes of participatory interests apply to these portfolios and are subject to different fees and charges. A schedule of fees, charges and
maximum commissions is available on request from the manager, or is available on the website (www.momentum.co.za/collectiveinvestments). Forward pricing is used. MMI
Holdings Limited is a full member of the Association for Savings and Investment South Africa. The complaints policy and procedure and the conflicts of interest management policy
are available on Momentum Collective Investment’s (RF) (Pty) Ltd website at (www.momentum.co.za/collectiveinvestments). Associates of the manager may be invested within
certain portfolios and the details thereof are available from the manager.
Foreign securities within portfolios may have additional material risks, depending on the specific risks affecting that country. A money market portfolio is not a bank deposit
account. The price of a Momentum Money Market Fund participatory interest is targeted at a constant value. For money market portfolios the total return to the investor is made
up of interest received and any gain or loss made on any particular instrument, and in most cases the return will merely have the effect of increasing or decreasing the daily yield,
but in the case of abnormal losses, it can have the effect of reducing the capital value of the portfolio. For money market portfolios excessive withdrawals from the portfolio may
place the portfolio under liquidity pressures, and in such circumstances a process of ring-fencing of withdrawal instructions and managed pay-outs over time may be followed. The
Momentum Money Market Fund yield illustrated in our minimum disclosure documents and quoted daily in the press is the 7-day rolling effective yield. Bond and income yields
quoted in the press are historical yields based on distributions and income accruals calculated monthly while those quoted in the Weekly Income Fund Yield Summary are current
running yields calculated weekly.
A fund of funds is a portfolio that invests in portfolios of collective investment schemes that levy their own charges, which could result in a higher fee structure for the fund of funds.
The investment manager of the portfolios pertaining to this brochure is Momentum Outcome-based Solutions (Pty) Ltd, registration number 2004/023064/07, address 268 West
Avenue Centurion 0157 is an authorised financial services provider in terms of Section 8 of the Financial Advisory and Intermediary Services Act, 37 of 2002 (FAIS Act), as
amended, FSP licence number 19840. This information is not advice as defined and contemplated in the FAIS Act. Momentum Outcome-based Solutions (Pty) Ltd is also registered
as an administrator in terms of Section 13B of the Pension Funds Act, registration number 24/401.
Momentum Investments (Pty) Ltd
268 West Avenue Centurion 0157 PO Box 7400 Centurion 0046
www.momentum.co.za/collectiveinvestments
Registration number: 2010/021352/07
Terms and conditions apply.
Momentum, a division of MMI Group Limited, an authorised financial services and credit provider.
www.momentum.co.za